Tuesday 3 July 2018

Free-trade area agreement is just an idea.

What I read


According to “Canada Retaliatory Tariffs On US Goods Come Into Force” (2018) by BBC News, Canadian government has implemented another trade barrier against the United State on metal and aluminum products from the country in order to put political pressure on Canada-US trade relationship which has been established on NAFT and WTO free trade agreement. Like the EU and Mexico, Canadian government has imposed 25% of tariff on American metals products imported which would affect the export of value of the United State by the estimated amount of C$16.6bn which was the same export value loss of the Canadian metal products in 2017 caused by the US tariff measures.
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My response 

I think that the trump tariffs, a series of tariffs imposed during the presidency of Donald Trump, is not a good thing. President Trump has imposed tariffs on certain goods such as steel, aluminum, washing machines, and solar panels. He just announced trade war with the European Union, Canada, Mexico, China, and India. In fact, his trade policy just made those countries angry and now they are into war by imposing their own trade barrier fight against the US. This is not a good thing for global trades. I think Trump does not respect on free-trade agreement (FTA) such as WTO and NAFT that global community has put an effort to reduce trade barriers amount countries. I strongly believe in free-trade area. What he has done is blocking trades and that policy is unfair and that would hurt the US economy as well. Trump said that his tariffs on steels would increase domestic consumption on metals and that would be benefit for the US metals producers. But I think trade barriers among nations should be reduce and let producers complete on producing the best quality products to customers. 

Recently, I talked to some of my clients who are doing business on exporting steel products and automobile parts. They were really worried about how to keep cost of production low while metal prices has increased dramatically. Several giant automobile manufacturers such as General Motors, Toyota Motor and Volkswagen were disappointed with the US president international trades administration.  Thai exporters of steel products expected that their export value would be decreased by 7 billion baht, and they were planning to explore new markets into Philippines and Cambodia to replace the US market. 
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My question

Should a country impose trade barriers to against imports of goods from foreign countries?
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Reference

5 comments:

  1. Apart from the harm of a trade war, tariffs are bad for the economy of the country imposing them. If Trump really wants to hurt Canada, he should let them continue shoot their own nation with economically harmful subsidies on Canadian products, for which the Canadian people have to pay.

    The weird thing is that I think every economist must know this: it's basic economics that if you put a tariff, subsidy or other trade barrier on a product, you harm your own nation's overall economy since everyone else has to pay the higher cost of those goods. Americans will almost certainly lose jobs because of Trump's tariffs and the economy will produce less wealth to share than it would have otherwise.

    The question that I was interested in is why do politicians force the majority of people to pay to support the greedy citizens in economically inefficient industries? Why an I forced to pay because lazy farmers or steel makers won't become more efficient to compete fairly?

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    Replies
    1. M beat me to it with her post above, but about a week ago, there was an excellent article on this by an economist writing in The New York Times. If you are interested in these issues, you might also like to look at Veronique de Rugy's essay "Why the U.S. Should Drop All Tariffs" at https://www.nytimes.com/2018/06/20/opinion/trump-trade-tariffs-china.html

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  2. ANd of course, I was wondering what M and others think about Thailand's trade barriers that are harmful to the Thai economy. Should there really be massive taxes on imported luxury goods? Should rice and rubber be subsidized by tax payers and the rest of the country?

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  3. Thank you for sharing the interesting topic and your valuable opinion.

    In my opinion, no country should impose any barrier (tariff barrier and non tariff barrier) on other countries unless it was their mutual consent or acceptable reasons, for example, protection of human, animal or plant life, protection of environment, national security and other reasons which were concluded in the agreement.

    Once one party of the FTA breaches the agreement, another party has the right to impose retaliatory tariff. As a result, the citizens of both countries will be undergoing the high price of goods because the increased on tariff rate has an effect on the calculation of duty ,VAT and retail price.

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    Replies
    1. But I agree with the expert economist writing for The New York Times article I cited above that even if other countries impose tariffs on your goods, it is irrational to retaliate with tariffs on their goods. That only shoots yourself, as I'm sure every economist knows, and as Trump's economists must have told him.

      Human behaviour is often harmfully irrational,and sometimes the most irrational things are the most popular. I'm sure that both the Chinese and American citizens think that their governments are helping them when in fact they are harming them.

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